Q4 2025 Seagate Technology Holdings plc Earnings Call
It's about 2025, delivering strong double digit top and bottom line growth and achieving record gross margin levels.
June quarter revenue came in at $244 billion.
13% sequentially and up 30% year over year.
We expanded non-GAAP gross margin by 170 basis points sequentially to 37, 9%.
And we increased operating margin by 270 basis points to 26, 2%.
Our resulting non-GAAP EPS was $2 59.
As a high end of our guided range.
For fiscal 2025.
We grew revenue by nearly 40%.
$9 $1 billion.
We achieved non-GAAP operating profit of $2 1 billion, marking one of our strongest annual performance fees.
We recorded non-GAAP EPS of $8.10.
These results underscore our solid operational execution and ongoing momentum for data center demand, particularly among global cloud customers.
Rent from near line cloud sales, along with seasonal improvement in the VM market.
Led to a 14% sequential increase in our drive revenue, reaching $2 $3 billion.
Volume shipments increased to 163 extra.
From 144 extra life in the March quarter.
Mass capacity revenue topped $2 billion Mark ups.
15% sequentially and 40% year on year.
As capacity shipments were 151 extra bytes compared to 133 extra but in the prior quarter.
The airline shipments into cloud and edge data center made up the vast majority of mass capacity volume.
In the June quarter, near Atlanta represented 91% of mass capacity extra bias with shipment of 137 extra bytes up 14% sequentially and a 52% year on year.
Our 'twenty four and 'twenty eight terabyte PMI products.
Been widely adopted by global cloud and enterprise data centers to support their massive data workloads.
At the same time, we are ramping our hammer based mosaiq projects and.
And continuing to build customer momentum.
Three major cloud service providers.
Our qualified on our <unk> products with additional qualification proceeding extremely well.
On top of strong demand growth from cloud customers in the airline sales into the enterprise OEM market show a modest sequential improvement in reported and we expect stable demand over the next few quarters.
The remaining 80% of revenue came from legacy and other product lines.
Sales from the legacy market totaled $270 million up 6% sequentially, while revenue from our other product lines increased 3% sequentially to $163 million.
Starting in the September quarter, we plan to adjust how we discuss our end markets.
We will focus on two main areas data center and edge Iot.
The data center markets accounted for about 75% of our fiscal 2025 revenue and include the online process and systems sold into cloud and enterprise customers as well as cloud based applications.
Edge Iot include consumer and client centric markets.
Along with network attached storage.
We believe this new framework is better aligned with industry practice.
The AI driven market we serve today.
Moving onto the rest of the income statement non-GAAP gross profit increased to $926 million.
Up 19% quarter over quarter, and 59% compared with the prior year period.
Our resulting non-GAAP gross margin expanded to 37, 9%, we continue to benefit from a favorable mix, including increased adoption of our latest generation products and ongoing pricing adjustment.
These factors combined with a strong demand environment for data center products supported non-GAAP gross margin for the authorize business are both as a corporate average.
non-GAAP operating expenses totaled $286 million.
4% fourth quarter and in line with our expectations.
<unk> income and expenses decreased 9% sequentially to $73 million.
Due impart to lower net interest expense during the quarter.
Adjusted EBITDA was $697 million up 24% quarter over quarter and up 73% year on year.
non-GAAP net income was $556 million.
<unk> non-GAAP EPS of $2 59 per share based.
Based on the diluted share count of approximately 215 million shares.
Turning now to cash flow and the balance sheet.
We invested $83 million in capital expenditures for the June quarter, and $265 million for fiscal 'twenty five.
Which equates to 3% of revenue.
Looking ahead to fiscal 2006, we anticipate capital expenditure to be inside our target range of 4% to 6% of revenue, while we continue maintaining capital discipline.
Free cash flow nearly doubled in the June quarter to $425 million.
Upfront $116 million in the prior period.
Based on our current outlook, we expect free cash flow generation to expand further in the second half of calendar year 2025 compared to the first half.
This is even accounting for a substantial variable compensation payout in the September quarter, which is consistent with our strong performance.
In the June quarter, we returned $153 million to shareholders through our quarterly dividend and we returned nearly 75% of free cash flow to shareholders for the fiscal year, demonstrating a strong commitment to our capital return strategy.
Cash and cash equivalents increased 9% sequentially to close of the June quarter with ample liquidity of $2 2 billion.
Including our Undrawn revolving credit facility of $1 3 billion.
We reduced our debt balance by approximately $150 million during the quarter, including retiring $505 million to.
Through a new $400 million note issuance and cash on hand.
We exited the quarter with gross debt of approximately $5 billion.
The combination of lower debt and strong profitability.
Routed in net leverage ratio of one eight times with.
With further reductions anticipated in the coming quarters as profit expense.
Turning now to September quarter outlook.
From a demand perspective, the visibility gain through our be towards strategy instill confidence in sustained demand find what our high capacity near line drives and support both revenue and margin expansion in the September quarter.
As previously communicated starting in fiscal 2026, we will be subject to a global minimum tax rate in the mid teens.
Accounting for these factors and for the 14 week period.
We expect September quarter revenue to be in the range of $2 5 billion.
Plus or minus $150 million.
At the midpoint this reflects a 15% improvement year over year.
non-GAAP operating expenses are expected to be approximately $290 million, reflecting the 14 week period, partially offset by lower variable compensation as we reset the annual plan for fiscal 2006.
Based on the midpoint of our revenue guidance non-GAAP operating margin is expected to expand into the mid to high 20 percentage range.
And non-GAAP EPS is expected to be $2, and 30% plus or minus 20.
Business, 16% tax rate and non-GAAP diluted share count of 121 million shares.
Our EPS guidance reflects the estimated dilution from our 2028 convertible notes and equity compensation.
Dilution to non-GAAP earnings, but on the convertible notes of course, when the volume weighted average price of <unk> stock trades above approximately $108 during the period.
We target to partially offset the dilutive impact of the convertible notes through share repurchases, which we expect to resume in the current quarter.
To close secrets from June quarter performance underscores our continued focus on driving growth.
Enhancing profitability and optimizing cash generation.
We are executing our strategic objectives underpinned by a structurally changed business model and leading technology roadmap to deliver on our financial targets and enhance value for both customers and shareholders.
Operator, let's open the call up for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you were using a speakerphone please pick up your handset before pressing the keys.
Draw. Your question. Please press Star then two.
In the interest of time, we ask that you limit yourself to one question. If you have further questions. You may reenter. The question queue. Once again that was star one to ask a question at this time, we will pause momentarily to assemble our rock.
And your first question today will come from Erik Woodring with Morgan Stanley. Please go ahead.
Good afternoon, guys. Thank you very much for taking my question John.
John Luke I, just wanted to kind of ask you about that.
Maybe implied gross margin guidance for the September quarter.
The last eight quarters, you've expanded gross margins by over 200 basis points sequentially on average.
I believe at the midpoint of your guide.
Depending on the interpretation of mid to high 20% operating margins, you're guiding to something like 20 basis points of sequential margin expansion.
Can you maybe one just confirm kind of that math and then two just help us understand the puts and takes and maybe why we're not seeing that gross margin imply gross margin expansion in September.
Despite the confidence that we're hearing from you guys about getting to 40, 40% gross margins in a few quarters. Thanks, so much.
Thank you Eric.
I would say year over year, our estimate is a bit lower after the Fas is significantly lower than what.
He is implied in the guidance.
Guidance, so we have.
Just achieve a new record high.
In our <unk> study in term of gross margin and having a very high operating margin, but we are guiding up revenue. We are dialing up gross margin and operating margin I'll say significantly more than what you order your modeling right now so what are our path to achieve.
The milestone the first milestone that we discussed at our Investor Day, a few weeks ago is is intact now we're going exactly in that direction I think we can be there fairly soon.
And our next question today will come from Osten <unk> merchant with Citigroup. Please go ahead.
Great. Thank you for taking my question.
If you can give a little bit on the AI inference etch demand.
But on the cloud side, maybe also on the edge side, what are you seeing perhaps.
In the customer.
Commentaries that you were having that would suggest that there is an uplift here from AI and sort of what's kind of your as you look ahead into the next few quarters. What are you implying or what are you seeing in terms of AI exabyte demand specifically from inferencing and workloads that are sort of baking workloads that you're expecting.
For your guidance. Thank you.
Thanks Oscar.
Fairly complex space, a lot of different things being called AI, what I would say generally speaking in the cloud. It's about video properties. We've seen this for many quarters in a row now.
The video is actually stored in the cloud and the diversity of video that's actually coming in from.
All parts of the world that gets stored in the cloud those are tremendously rich.
Datasets for us to ultimately store on hard drugs.
As far as edge goes youre, starting to see all kinds of different applications, whether theyre video applications themselves factories.
Safety.
The factory efficiencies hospitals, there is a lot of big datasets that exist, especially video datasets that exists to the edge and some of those applications are.
Taking us with Goldman for Ensign, but they need a lot of David referred with us.
<unk>.
And then there's also just the normal growth of I'll call. It.
Data and analytics tax data analytics still but.
Interestingly at the edge starting to crossover from a point where.
You may be treated data is something that you had to sort through and then delete Dallas just snapshot snapshots snapshot just keep saving lots of snapshots of the edge because you might want to go back and look through it. So those are actually driving.
The edge growth that we've referenced to as well.
If I may just how does that affect kind of what you guys shared at the analyst event in terms of.
Exabyte Cougar and you kind of look ahead. Thank you.
Yes, I think the biggest wildcard in that and we're still sticking to the same mix of like CAGR that we talked about mid twenties.
We're comfortable with that but there are we are watching some of these new applications that people talk about viral applications that happen to be very data dependent are very interesting to us and most of those are edge applications, because theres a lot of data at the edge that ultimately gets just thrown away and so if it can be processed or stored longer.
It's more interesting to us so I think the cloud knows how to deal with the data that actually ultimately resides on the cloud very well.
Great and especially the sovereign and sovereign data weight datasets sorry.
Especially sovereign datasets, where people are wanting to keep the data locally like we made reference to in the prepared remarks, I mean, those are interesting as well.
Thank you.
And your next question today will come from Jim Schneider with Goldman Sachs. Please go ahead.
Good afternoon, Thanks for taking my question.
Maybe if you could talk a little bit about the hammer contribution you saw in terms of revenue in this quarter and whether you expect how much you would expect that to increase if at all in the September quarter, and then maybe following onto that any kind of impact do you expect that would have on gross margin either positive or negative.
In the quarter. Thank you.
Yeah. Thanks, Jim So hammer is growing steadily and we're very happy with more people qualified like we've talked about and will continue to ramp.
What we're very focused on in the company right now is getting to the four terabyte per provider platform.
In some sense winding up for that which we will expect that ramp early in calendar 2026, like we said in the prepared remarks as far as gross margin. The current product sets are still accretive to gross margin as we get higher and higher we expect it to be more accretive, but Jim look you'd wanted to give some more color on that.
We are at we are ramping hammer.
Higher quarter over quarter, and we have already three major cloud customers that are qualified on Mosaiq III and we have started mosaic four terabyte per rep per basic so we are executing how what are the market.
Recently discussed at our Investor day.
And we expect Q1 to be another step higher intermodal volume and of course in term of revenue and as we discussed before.
Because uh huh.
He has higher capacity drive and lower cost per terabyte, we expect a positive impact to our gross margin.
Thank you.
Yes.
And your next question today will come from <unk> Mohan with Bank of America. Please go ahead.
Yeah. Thank you Yeah, you had a strong quarter clearly, but you guided revenue slightly below consensus for the September quarter in your DSO also jumped up so I was wondering if you could clarify.
If there was anything that you would point out in linearity in the quarter and I guess the question is.
How well is your hammer capacity ramp aligned with qualifications in demand like are you tracking that are on production.
<unk> demand because of qualification, which could maybe potentially drive some catch up in the December quarter. Thank you so much.
Yes.
Gianluca jump in here, but relative to the.
The hammer ramp.
Sorry, let me let me just talk about this quarter versus last quarter last quarter. Obviously, the planning for these quarters is six months nine months ago with build to order or more.
Some cases and so we have to look at what is qualified exactly to your point and then what's going to be qualified in six months or nine months, we're leaning into the product transitions that happened along the way.
If anything we could make more product of any kind, we would make it but we're also trend incentivize these product transitions to three plus and then four plus as well and we are.
Consuming a lot of.
Our operational efficiency that way.
Maybe there was a little bit over Paul to your question less about last quarter and that's indicative of strong demand.
And then may be stronger as we get out to the back half of the year, we certainly see fairly strong demand right now we're trying to balance our manufacturing capability in that planning that we've done long term, what we had promised people nine months ago, we're trying to balance all that together, but also prioritizing this product transitions.
Yes, No answer you said well we had a very strong.
June quarter.
We achieved as a result than what we were estimating at the beginning of the quarter.
And we are guiding a better quarter in September.
Demand is strong is a bolt supply.
So our guidance is mainly based on what we think we are ready to supply during the quarter and wed.
Volume of extra less they will be fully sold.
We also need to dedicate a little bit of our production tool qualification. So some of our volume is dedicated to call and as you know we are qualifying gay big number of customers on hammer.
So of course, a week now.
Slightly impacted in the volume battery sales because now we need to keep some volume, Florida for a customer quote, but we are growing and they're in the direction of ethanol. We recently discussed is another step further into our improvement in not only revenue, but even more importantly in profitability.
And now when you look at our.
Guidance of course, you need to remember that starting this quarter, we will be subject to the global minimum tax. So when you look at <unk>.
<unk> of course that has an impact from the tax expanse antibody is also an impact from it.
The number of shares outstanding because of a convertible and and equity compensation. So when you model all of those things correctly, you will see actually a fairly good improvement in both gross margin and about 18 months.
Thanks, John Luca just to clarify that last point you made around.
The capacity ramp in some of the capacity being.
Tucked away sort of for these calls would you say that that's something that just continues to roll forward as youll qualifying more customers or do you have.
Potential for really meaningful step up once you get into December because <unk> got these csp's called on Basel III. Thank you so much.
Now we don't we don't guide December but as I said before we are going into the direction of continuing to improve revenue and profitability and of course part of this revenue now is coming from adding a little bit more supply available. So we are we are.
Executing our plan.
We don't see any.
The major constraint right now in in achieving what we what we have said recently, we are very very confident.
And your next question today will come from Thomas O'malley with Barclays. Please go ahead.
Hi, guys. Thanks for taking my question on.
The hammer side I'll ask a different way I don't think you guys want to give out the exact percentage of revenue over the next couple of quarters. I think you did a good job at the analyst day of showing where the crossover point was.
First half of fiscal year, 'twenty seven but.
Maybe from a customer perspective like a large part of the rare thus far has been with a single customer youre talking about multiple multiple customers qualified at this point our customers two three et cetera outside of customer one making up a significant portion of the ramp.
Like 10% or more of let's say I just I was just trying to get an understanding of the adoption outside of the first guy. Thank you.
Thanks, Tom Yeah simple answer to your question is yes. The other customers are starting to ramp as well in the pool is pretty strong also depending on who's called where they may ask for more of the less generation product or maybe want to wait till the four terabyte per flutter, but everybody has pretty good visibility and we have multiple customers pulling hard.
And thats indicative of the exabyte demand maybe to the earlier question that once he was asking.
We add exabyte capacity by getting through these transitions and so the steps that our move is we're not really trying to add gross capacity of number of drives we're trying to get through these transitions as fast as we can be much more efficient with the experts.
Helpful and in terms of that transition I think you guys had previously said on the mass capacity side.
Or are you kind of ran into a wall in terms of where you were willing to producers like a 160 X device on the mass capacity, that's still the right way to think about where things are stopping before you get the growth from the technology side or are you looking at many different way down just wanted to see if theres an update there.
With continued ramp of Mosaiq III plus platforms, we could continue to grow but four plus allows significant growth above that yes. So it's not it's another wall. So much anymore really was when we were stuck in the middle of two terabytes per platter product, but.
We're really past that now.
Super helpful. Thank you.
And your next question today will come from Amit <unk> with Evercore. Please go ahead.
Thanks, a lot good afternoon, everyone.
Dave as you think about the LTA is that giving you visibility it sounds like into early 'twenty six right now.
Can you just touch on what pricing assumptions are you seeing embedded on an exabyte basis in these contracts and really as you think about the hammer products on to ramp up over the next 12 months.
You end up in a pretty good cost advantage I think on a per exabyte basis on Hammer Exabyte up do you think these LTE enabled you to keep those cost savings for Seagate or would we see a bigger drop in price per exabyte did you have to engage with your customers with at that point.
Yes, no we don't have to it's a good question, we don't have to incentivize the transition I mean, there is a significant <unk> benefit of running these new products in your data center. So if you think about.
40 terabytes versus a 30 terabytes for example.
Youre going to run that for six or seven years is a huge tcl benefits. So there is an incentive baked in right there.
We know what our costs are going to be and we know what pricing, we want to incentivize that and we know what.
Margin.
To be able to.
Go back and re feed our R&D and our supply chain and everything else. So we're balancing all of these things in the year. The planning that were doing John would you want to talk about pricing.
We are not changing our pricing strategy that we have started more than two years ago.
So our like for like pricing.
We'll continue to slightly increase.
Every time, we negotiate the new made to order and of course, the mix is growing into a more of a higher capacity drives so but he is also desktop those offset about that again everything is that is aligned to how we are executing our plan that we presented just a few weeks ago.
Okay.
Perfect. Thank you.
Thanks.
And your next question today will come from Aaron Rakers with Wells Fargo. Please go ahead.
Yes, thanks for taking the question.
Can I ask a little bit about free cash flow generation and how we should think about share repurchase.
I think in our prepared comments.
Wanted to ask that you should be in your capex or.
Our capex spend range of 4% to 6% I guess the first part of this is that that would seem to apply a fairly healthy uptick in the capex spend.
Year over year for fiscal 'twenty six for fiscal 'twenty, five and I guess why would that be in the <unk>.
Second question is kind of tied to that is that as we see the generation of free cash flow you've hit the sub 5 billion our gross debt level.
How do we think about the right level of cash operationally you are willing to hold or.
Maybe in the opposite way, we should think about excess cash being built in capacity for share repurchases any thoughts around that would be helpful. Thank you.
Thanks Erin.
I'll hand, it over to Jonathan just a second but just to handle from an operations perspective, I mean, obviously given what we've been through in the last few years, we were pretty tight on capex. So im not sure that looking at a year ago or two years ago baseline is a great way to think about it some of our gear it needs to be replaced.
There is a small tick up for that but then there is also us looking forward into FY 'twenty seven in FY 'twenty agents, saying, how do we make sure we stage for four terabytes of clutter and Pfizer, but splutter mix to make sure we have the right here for that.
That may drive Capex, a little bit, we'll still be well within our range, though and then John Mcdonough.
Yes, Adam so free cash flow is improving a lot now you have seen already in the June quarter, a major step up.
This will continue as we said during the second part of kind of 25, and we are also continuing Florida was the second part of our fiscal 2006.
We have reduced our debt as you said the target level.
Targeting <unk>.
<unk> more than a year at this point.
And Dave just announced that we added staffing share buyback. So again, we are.
I think executing our plan.
I think obviously is a good time to restart the share buyback and.
And in term of liquidity, you were asking and excess cash flow or excess cash.
We don't have excess cash right now.
I think we can maybe still increases a little bit our cash position, but the vast majority of our free cash flow of course, we'll go back to our shareholders through the dividend and through the share buyback.
Yes. Thank you.
Thank you and your.
And your next question today will come from Ananda Baruah with loop capital. Please go ahead.
Yes, thanks, guys for taking the question.
Dave just going back to your prior remarks about.
The AI drivers that you're seeing in your business.
This would be sort of not at the edge data Center remarks, Ed did you did you actually make mention that youre seeing multiple types.
AI video drivers.
And if you are could you do.
Do you mind, just sort of speaking to you guys again, I just want to get clear on those thanks.
Yes, I would say another there is the video properties that I call them.
The things that are storing a lot of video in the cloud and then sharing that video across.
Many many users around the world right. So we all are familiar with those.
Use of those every day. There is also just unstructured data that's coming into the cloud for processing to be video content as well and then there's video generations from some of the new AI applications also that some of those are starting to go viral as well that's a small trends so far so the video processing and the <unk>.
Data processing is as big and then the the.
The video properties as I call them is just huge creating consumers are creating all kinds of diverse content and then storing them through these applications.
And are you are you seeing from that from a from the autonomous sector anything starting to happen with January to have AI any visibility into that.
That's it for me thanks.
That's an interesting question. So we do have some partnerships with people that are making autonomous vehicles typically so far that the data is actually.
Gathered in the field are then processed in a local cloud.
And it's fairly data rich.
But so.
So far there hasnt really been a.
A generation of data at the extreme edge and then monetization somewhere else. Besides just teaching the car how to drive better should that ever happen.
The cars themselves become.
The units that are actually picking up a lot of data and ensuring it some other way that could be a huge opportunity. So far we haven't seen that its more about training and inferencing just to make sure the vehicles are driving rate and stay safe.
Got it thanks a lot.
And your next question today will come from C. J Muse with Cantor Fitzgerald. Please go ahead.
Yes, good afternoon, and thank you for taking the question. So I was hoping to better understand.
Your ability to drive revenue growth, both short term and longer term. So for the September quarter, Youre guiding up 2% you have an extra week, but you talked about select hammer bits going to qualification. So I would've thought perhaps with the extra week, maybe you could have had more output. So is there something else going on there or is there a mix issue.
Would love to have.
And then for fiscal 'twenty six.
At your Analyst day, you talked about longer term growth of low to mid teens top line and I'm just curious at what point in the Hammer ramp do you think you will have the capacity to support that type of growth. Thanks. So much.
Yeah, I'll, let gianluca deal with a longer term period, but obviously.
As I said before the quarter over quarter stuff.
A lot of those.
Supplied perspective on these quarters was dictated six months ago or nine months ago under built to order and I don't think our customers look at it as a 14th week or an extra week or whatever so.
If there happens to be a little bit more demand at the end of the quarter, maybe it will come our way.
Maybe some evidence that it did last quarter, but I don't really get into what happened in one week period from our perspective, the way we put more expedites online has to go through the product transition not necessarily by capital to try to build more for demand because that would be a long long lead time any way. So we're actually.
Very focused on getting the new products and qualified up the ramp so on and so forth and that will help build our margins yes.
Yes, the mix is going in the right direction. So we are increasing both mosaic saw diameter product and as a last generation of the amount of products. So you will see the increase in exabyte.
Implied in our guidance and also what we have done. This most recent quarter. We are increasing extra basically are not increasing unique facilities. He has all the technology transition so more and more we move customers to hammer them more and more do we have the opportunity to increase exited by the end of costs that we have as I've seen that.
In <unk> revenue.
In term of what.
We what we said at our analyst day intermodal revenue growth.
The low to mid teens.
We guided next quarter $2 5 billion. If you look where we were a year ago. I think is probably 15% higher so I don't see any anything different compared to what we were saying a few weeks ago and what we are executing of course I don't have any.
Quarter is different.
And as I said before we guide based on what we think we are producing in the quarter.
We will produce it could be more will be able to generally seem to be more revenue, but right now obviously the debate.
Very helpful. Thank you.
Oxygen.
And your next question does come from Krish Shankar with TD Cowen. Please go ahead.
Hey, guys. This is Eddie for Krish.
Just a question on the guide it seems that your guidance implies incremental gross margins above 50%, even though we are still below the $2 6 billion revenue baseline you outlined on the analyst day I Wonder as you go from the $2 $5 billion in September to $2 6 billion and above one.
Your incremental gross margin be better than the 50% number you guided at the analyst day like are there some headwinds in the near term.
A little bit.
Puzzling, especially given that the hammer revamp is still in very early stages. So someone should expect like revenue gross margin accretion above the 50% you guided but.
Any color on that regard would be helpful.
Yes, guys I think you need to look at your moderates a bit.
Deepa because the implied gross margin guidance is way higher than what you are saying.
Again.
Look at your model look at the impact of <unk>.
The increase in the share outstanding the increase in attacks.
But the gross margin.
Our guidance is match items and 50 basis points sequentially.
Yes.
Sorry, John look I meant 50% incremental gross margin.
Not 58 basis points.
Okay.
Well no I will say that every quarter will be a little bit different.
Depend exactly from <unk> that we <unk>.
Change quarter over quarter.
I will say our forest.
The goal is to achieve a $2 6 billion in revenue and a 40% gross margin and I think we are trending well embed that action.
And after that.
Our goal is to continue to increase revenue and add on sales.
Low to mid teens as we discussed.
The analyst day, and increase our profitability for an incremental 50% gross margin. So I would say nothing changed in the last eight weeks. So I think the plan is there.
Is ongoing and we are executing with.
Got it thank you.
Thank you Andrew.
And your next question today will come from Timothy Arcuri with UBS. Please go ahead.
Thanks, a lot Dave you made a comment that I hadn't heard you make before you said the capacity is booked out to mid 'twenty, six and visibility extending into the back half.
What does that mean, because build to order lead time to build to drive as a year. So.
If you place an order now youre not going to get to drive until this time next year anyway. So sort of by definition you have a year worth of visibility are you changing how you book that capacity and I guess part of that is what does that really give you like do you know exactly what's going to ship in December I know you don't want to give us guidance, but can customers push out like.
Like if you wanted to guide December could you tell us what youre going to ship in December.
I'm just wondering if something changed for you to give that.
Got it thanks.
Nothing has really changed.
And your somewhat right remember, we're leading through these product transitions. So we have customers who are.
Driving us to not only start the ramp up of Mosaiq III plus will start to ramp up mosaic core plus and so on and they are working with us on qualifications.
And Thats some of the stuff that we talk about visibility they generally want exabyte. So they don't want specific boxes, but they want the most efficient.
As they can get and so do we have pretty good visibility to that yes, and we have long lead times for some of the components. So we have to make sure we start those components right now.
If that helps you comment Tim.
Yes, I guess I'm, just trying to figure out like do you know exactly what youre going to ship in December I know you don't want to give guidance, but I mean could December be down potentially or do you have.
The ability to say look we know exactly what we're going to ship in December and we don't want to tell you, but we at least know what is going to be.
Right I would say, we know what the customers want and demand is very strong so it made.
No.
As far as what else might happen in the world I don't know what else might happen in the world, but from our perspective demand is still strong probably stronger than what we have capacity for and even though we are building capacity as we get through some of these transitions the exabyte capacity via the transitions and team and we said.
And obviously also in prior calls we expect kind of 25 to sequential increases in revenue and profitability. So we continue to embed embed that action. So December would it be higher revenue and higher profitability.
Thank you.
And your next question today will come from Steven Fox with Fox Advisors. Please go ahead.
Hi, Good afternoon, I was just curious if there's any seasonality we have to think about as we.
Figure out the full fiscal year quarters. It seems like there's a lot of.
Positive quarter on quarter.
Yeah.
<unk> as you go through the year, what kind of seasonal warnings really throw off John with it.
The seasonal Steve is.
Starting to really diminishing in our in our business. So if the legacy and other businesses are still have some seasonality of the V is interesting because.
As time marches on via some of the workloads are moving to the cloud as well and so we're seeing not the typical seasonality that we would have seen in the VM market.
Muted now, but I think the bulk of our business there really isn't any seasonality anymore.
Thanks, and just real quickly.
So in total I would say.
March quarter is usually.
Our lower quarter in term of revenue, but as Dave said that seasonality impact every year to be compensated this morning.
Thank you and just real quick if I could squeeze one in.
I know someone asked you about receivables I'm not clear on the answer in terms of why the receivables were up so much in the quarter.
Although there is nothing strange as you know in the past we did also some factoring and we didn't do any factoring this quarter.
Because in our free cash flow was very strong already so nothing nothing unusual that was saying that in that business.
The receivable higher yes, I would say we're back to running the business the way, we want to and we've got the supply chain moving the way we want to so we're very pleased with progress in FY 'twenty five.
Great. Thank you.
Your next question today will come from Tristan <unk> with Baird. Please go ahead.
Hi, good afternoon.
High level question it looks like NAND.
Has it been cannibalistic to HDD demand for some time.
Each so each type has.
Our own respective end market and theres been so much in terms of capacity Kathy NAND recency that has precluded any production cost are down.
So eventually NAND capacity normalizes and production costs should return to a normal curve should we view this as a.
Pressure on HDD demand in certain end market.
Or are the dynamics, such that notably with Hammer your density versus production cost to maintain the gap with Nab.
Yes, that's a complex.
Question, but I would say that your last point is the <unk>.
Way, we think about it we're continuing to.
The increase.
Increase the capacity point per drive and also keep our costs in line, we have a great value proposition for customers and so therefore in the markets that we that are really material to us like the cloud markets. The interface between NAND and HDD is not really changing that much and when I say interface.
Keep in mind, there is a lot of NAND in the cloud right. There's a lot of front end memory in these application spaces and in some in some cases.
Very memory dependent.
But when it comes to mass data storage the interface between the all demand is being used in all of the hard drive fits that are being used is not changing that much and because of the economics that you talked about because of.
Like we've talked about in the analyst day the.
Total amount of capital that would be required to replace device in that our HCV with NAND. So.
<unk> is a great technology, it's got a lot of interesting applications on the edge they need to manage the business wells that may be the result that maybe with resulting in some of the behaviors that you made reference to but in the bulk of mass storage applications certainly in the cloud.
Architectures are not changing.
Great. Thank you very much.
And your next question today will come from Vijay Rakesh with Mizuho. Please go ahead.
Yes.
And then Luca.
Just a question on the gross margin side, assuming your margins.
Okay.
738, 838% in the September quarter is that pickup coming from pricing utilization and how much. It makes up can you give us some attribution like one person goes.
From the pricing improvement versus utilization versus the hammer mix and then a follow up.
And you are talking about the September quarter or the June quarter.
September quarter, sorry, yes.
Yes.
I'd say all those factors that you mentioned, so ameren volume will be higher and this is of course <unk>, while our gross margin.
And the pricing strategy as we said before it is not changing so for the few go answer to that.
We will now.
In the September quarter, we will have a little bit better pricing and we are selling or one hour per the Hudson. So of course also on the cost side.
We are getting fairly good Dev.
Cost per terabyte decline.
So I will say no dividends coming from from the last few quarters, we are trend.
Trending in the same direction and and we're continuing we said we have sequential improvement.
Got it and then I mentioned three customers on Hammer now and then I think you guys have said five customers by the end of fiscal 'twenty six can you talk to how the other two are going and how you expect.
The number two or number three of amps to progress I guess thanks.
Yes, so earlier I talked about the fact that there were more people.
Ramping the product.
Relative to the three customer comment we haven't really said five yet, but we've said major customers will be qualified by early 2006. This was in the prepared remarks.
And we also as <unk> talked about that at analyst day as well. So we're still on exactly that path to your question about how are the calls going they are going very well I think as.
As customers need more advice, they see that as they get through the qualification they see that as an option.
We're creating that demand obviously, we with the build to order we have to be very prescriptive of it. So we know exactly what we're going to be able to build and we know which wafers are flowing and we know it.
Heads and media capabilities, we're going to have to hit those things will be as predictable as we can for them.
But the progress on the qualifications is going quite well.
Alright, thank you.
And your next question today will come from Mark Miller with the Benchmark company. Please go ahead.
Yes, I am trying to get my arms around the impact of this global minimum tax which kicks in in fiscal 2026.
You said, the non-GAAP tax rate will be 16%.
Can you give any insight with the GAAP tax rate will be with this global minimum tax.
Yes, it will be very similar so the global minimum tax is that is impacting us on both GAAP and non-GAAP.
Okay. Thank you.
Sure.
Thanks Mark.
This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
Thanks, Nick Thanks, everyone for joining us today fiscal 2005 was incredible year for Seagate and I'm really proud of our team's execution. We're operating in a strong demand environment driven in part by advancements in Gen. AI in the March towards all these <unk> models.
These breakthroughs are solidified data is one of the world's most critical resources hard drives are key component empowering businesses to harnesses full value of their data and seagate's, leading technology roadmap make us uniquely positioned to capture value from those growing opportunities. We appreciate the ongoing support of our customers our suppliers our employee.
And the shareholders and we look forward to sharing our progress in the quarters ahead. Thank you.
Conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.